Historically, “companies” (a term defined below) and their customers often have done business across a gap, so to speak. Product or service offerings by a company and the customers' desired product or service do not fully match. In part, this gap is a manifestation of the facts that (1) companies have an incomplete grasp of customer needs, their relative preferences and the pricing utilities customers attach to those preferences (which utilities, equating to the customer's willingness to pay, are dynamic) and (2) a company's costs, profits and inventory (which may control what it can offer on a timely basis) are also dynamic. However, it is also in major part a manifestation of the lack of information technology tools, which can close the gap. To collect dynamic customer and company data and then employ those dynamic data to close the gap is a complex technical problem.
Generally, the customer is treated as an individual and sales terms are customized only when the cost of negotiation is justified—for very large transactions. Many products and services, though, represent complex, multi-faceted offerings and customers weigh their preferences for product features differently at different times. A customer might care more about cost one day and more about availability or delivery time or warranty if queried a few days or weeks later, to use some basic trade-offs as examples. Generally, a company's product comprises many value elements, (explained later) all of which are bundled together to be sold as a single product. But, not every customer values all the aspects of a product equally or needs all. Every customer places a different value (which may be a function of time and situation) on each aspect of a product. With features bundled together in a product, companies end up either incurring costs to sell something to a customer that he does want or lose a customer because the extra undesired value elements forced the product price too high for the customer.
The underlying problem is both that customer demands are incompletely understood and that such demands can change quickly, whereas a company's productive capacity or service often does not have the same dynamic time frame and is supported by a relatively fixed (in the short term) capacity and supply chain.
Consider a situation that affects an interaction between the customer and the company. While buying products, many times, customers are unsure of their exact needs or expect their needs to change (after purchase and/or before they utilize the product). In such cases, customers may prefer to have flexibility to alter their purchases to accommodate their needs. In several industries, customers have to select and confirm the products at the time of purchase. Some industries do allow customers to return or change their purchased orders and/or its features within a defined time frame and with or without penalties. For industries where products sold are of high value and/or perishable nature, change penalties are quite high or changes are not allowed. For example, airline ticket booking, hotel reservation, car rental, automobile sales, special events, real estate and so forth.
In the airline industry, customers usually buy tickets one to four weeks in advance (of the premeditated travel date) and are often unsure of their exact travel plans at the time of purchase. But, customers may not want to wait until the last minute (or till they determine their exact plans) to book flights as the flights may become unaffordable or unavailable as the departure date approaches. So, customers try to make the purchase decisions based on their best estimate of travel plans, and hope that their reservations would match their eventual travel needs. Such guess work often creates problems, as needs change and customers end up with bookings at variance with their desires.
On the other side of the screen, often, companies face unequal supply-demand proposition for their products. For many products, the supply keeps ahead of the demand even after all sorts of advertisements and marketing strategies. Companies are not able to efficiently utilize the surplus supply (especially in case of products and/or services that are perishable or prone to quick obsolescence), causing millions of dollars in lost opportunity and costs. Continuing with the airline example, most US airlines experience an average load factor of about 80% or only about 80% of the seats get used. The rest 20% seals fly empty and contribute almost nothing (if any) to the incoming revenue. A significant portion of this surplus capacity could be used to satisfy the un-fulfilled flexibility needs of at least some customers, who may have wanted to alter their bookings to include one or more flight that had a surplus capacity. However, today, travelers who want to change their flights are unable, hesitant or unhappy to do so because of efforts required, change fees, higher fares, unavailability of desired flights (or fares) or any combination of such factors. A good chunk of these customers would be willing to pay more (as per their needs) to get desired seats. But the entire change process creates an embarrassing situation for a customer and seldom drives a satisfactory experience. This represents a mismatch in customers' needs and airline's offering. In a nutshell, airline has perishable seats that customers desire but the current system does not allow the customer to get that seat at a price that would benefit both.
From the above discussion, it is clear that the surplus capacity of the company may be mapped or utilized to satisfy customers' desire or preference for flexibility. In the context of the airline industry, the surplus capacity in flights may be mapped or utilized to satisfy customers' desire for travel flexibility. But so far, there is no existing system and method, which can allow a company to accomplish this optimally.
Today, airlines do not have any mechanism to allow such flexibility or changes in customer tickets at an individual level at conditions that would optimally satisfy both the parties. Instead, airlines try to deal with all such customers in a rather mechanistic way (or one cancellation/change policy) leading to unsatisfied customer demand and unused airline capacity. Besides the airline industry, there are several other industries (as mentioned above) that either do not allow flexibility or follow processes that involve high costs and/or demand significant efforts on the customer's end.
What is needed is a mechanism that allows customers to satisfy their need for flexibility at terms that concurrently benefit at least two of companies, their customers and any other entity. Indeed, there is no system or method available that can be applied to all the above industries, and many more, and help companies to match the availability of their products to their customers' preferences, let alone while concurrently maximizing the benefits to at least two of the company, its customers and any other entity involved in the transaction.
A technology platform (i.e., system) and methodology thus are needed for customizing, in an optimal way, a match between a company's cost and ability to provide flexibility to customers in buying products/services with the individual customers' relative preferences and utilities. In the airline industry example, a technology platform (i.e., system) and methodology thus are needed for customizing, in an optimal way, a match between an airline's cost and ability to provide travel flexibility to customers with the individual customer's preferences and utilities for travel flexibility.
More particularly, a system and methodology are needed which support optimal customization of service offerings in the airline and similar industries. If such a match could be made, both company and customer would benefit. The customer would be more satisfied and the company (both in short term and long term) will be more profitable. A win-win scenario is created rather than a zero sum game.